Rock-bottom interest rates are prompting savers to seek new ways to make their money work harder. Read on to learn how one wealth manager from our panel is now offering a very innovative approach to cash management.
findaWEALTHMANAGER.com user figures underscore just how many frustrated savers are out there, with this being the reason many people are coming to our service.
Last quarter, rock-bottom rates on regular savings accounts helped drive a huge 52% jump in the proportion of affluent individuals seeking a wealth manager because they are sitting on large cash sums likely to be earning next to no interest.
Some 44% of our users said they were holding cash, compared to an already high 29% in the preceding three months. We also saw a trebling in the proportion of users who indicated they were the recipients of large sums of money that they were unsure what to do with for maximum gain – either through inheritance, bonuses, property sales or other windfalls.
A solution to rock-bottom rates
The parlous state of savings rates in the UK currently easily accounts for these jumps. The number of accounts available continues to have grown to some 1,700, but all the while interest rates continue to slide. Bank of England figures suggest the average easy-access account yields only 0.15% today (compared to 0.47% at the start of 2016), with even the highest-paying yielding only around 1.5%.
As inflation has been running at 2.6% (as at June 2017), the vast majority of those keeping their money in simple savings accounts are therefore seeing their wealth dramatically erode. This is a particularly alarming situation for those who are “cash heavy”, as many of our users are because they either need easy access to their funds or because they are undecided as to what to do with them. Additionally, many see the markets as being “toppy” at present and so wish to remain on the side-lines and stay in cash for the time being.
So, what can savers do to ensure their wealth works as hard as it might?
Enter Quilter Cheviot (part of Old Mutual Wealth), one of the UK’s largest and oldest discretionary wealth managers and a member of the findaWEALTHMANAGER.com panel since 2012.
Quilter Cheviot has entered partnership with Flagstone, the London-based fintech company, to deliver an innovative online platform for its clients’ cash deposits which will allow them to open and fund new bank accounts simply and efficiently.
The benefits are threefold.
Firstly, clients with at least £250,000 to deploy will be able to choose between 450 term deposit accounts, allowing them to seek – with the help of their adviser – the best possible rates while knowing that all the institutions are fully regulated and monitored for risk.
Secondly, savers will also be able to manage risk more effectively by diversifying their deposits between up to 24 different banks – something that is very important for affluent individuals as the Financial Services Compensation Scheme only covers up to £85,000 placed with each authorised institution.
Finally, the service is fully online, allowing users to not only view their balances and interest earned 24/7, but also to easily see when fixed-term deposits are coming up for maturity and when new rates become available.
A huge impact on your wealth
The opportunity to earn more interest income could make a huge difference to your wealth. One entrepreneur now using the platform had previously held a £1.6m deposit in a single High Street savings account, earning just £1,600 a year in interest. Having diversified her deposits among eight UK banks (a process taking only a few days) she was able to massively increase her interest income to £13,718 per annum – all while reducing her risk exposure.
Of course, there are lots of options for those holding large amounts of cash to consider and it may that a diversified investment portfolio is more appropriate for at least a proportion of your wealth. What is sure is that leaving your wealth languishing at rock-bottom rates will mean effectively losing a lot of money year after year.
Savers need to ensure their money is growing at least in line with inflation, and of course preferably by significantly more. To start the process of finding out how you can make sure your wealth works as hard as it needs to, simply use our smart online tool to get connected to the best wealth managers for your profile and needs. Alternatively, speak to a member of our team today